ITEM:		ACTION ITEM
21.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2021-2022 BUDGET ADJUSTMENT
Meeting Date:			February 24, 2022	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Suresh Prasad	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: N/A
CEQA Compliance: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines Section 15378.

SUMMARY: Annually, the District considers its financial position after the end of the first 7 months of the fiscal year (FY). District staff has reviewed income and spending patterns from July 1, 2021 through the end of January 31, 2022 and determined that adjustments to the FY 2021-2022 Budget is required. The FY 2021-2022 Budget was adopted on June 21, 2021. Included in the budget adjustment process was a review of staffing levels, supplies, outside services, project expenditures, current work assignments and other factors affecting the current budget. The table below summarizes the proposed changes to the budget:

Monterey Peninsula Water Management District
2021-2022
Mid-Year Budget Adjustment-Summary
Revenue	Adopted	Change	Amended
Property Tax	$2,200,000	$100,000	$2,300,000
Permit Fees - WDD	150,000	0	150,000
Permit Fees - WDS	48,000	0	48,000
Capacity Fee	400,000	0	400,000
User Fees	5,000,000	300,000	5,300,000
Water Supply Charge	3,400,000	0	3,400,000
PWM Water Sales	9,828,000	0	9,828,000
Interest	130,000	0	130,000
Other	15,000	0	15,000
Subtotal District Revenues	21,171,000	400,000	21,571,000
Reimbursements - CAW	1,219,500	0	1,219,500
Reimbursements - Reclamation Tank	500,000	0	500,000
Reimbursements - Watermaster	39,600	0	39,600
Reimbursements - Reclamation	20,000	0	20,000
Reimbursements - Other	23,000	0	23,000
Reimbursements - Recording Fees	10,400	0	10,400
Reimbursements - Legal Fees	16,000	0	16,000
Grants	2,335,200	(1,239,000)	1,096,200
Subtotal Reimbursements	$4,163,700	($1,239,000)	$2,924,700
Carry Forward/Use of Reserves	2,788,100	(581,000)	2,207,100
From Capital Equipment Reserve	95,000	0	95,000
From Debt Reserve	0	500,000	500,000
From Fund Balance	1,385,900	(1,385,900)	0
Total Revenues	$29,603,700	($2,305,900)	$27,297,800
Expenditures	Adopted	Change	Amended
Personnel	$4,051,400	$0	$4,051,400
Supplies & Services	1,659,500	(28,100)	1,631,400
Project Expenditures	21,755,000	(2,927,800)	18,827,200
Fixed Assets	298,500	150,000	448,500
Debt Service	230,000	500,000	730,000
Capital Equip. Reserve	339,300	0	339,300
General Fund Balance	500,000	0	500,000
Pension Reserve	100,000	0	100,000
OPEB Reserve	100,000	0	100,000
Mechanics Bank Reserve	500,000	0	500,000
Election Expense	0	0	0
Contingency	70,000	0	70,000
Total	$29,603,700	($2,305,900)	$27,297,800

As the table above indicates, most of the change is attributed to decrease in project expenditures and additional debt payment to Mechanics Bank. A reduction in use of reserves which was adopted with the original budget because of the decrease in project expenditures. Detailed information regarding all other proposed changes, as well as their effect on reserves, is detailed in the background section of this report.

RECOMMENDATION: Following a presentation by District staff and a public hearing, staff recommends adoption of the proposed mid-year budget adjustment for FY 2021-2022.

BACKGROUND: The Board of Directors adopted the original FY 2021-2022 budget on June 21, 2021. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected reserves accounts.

Revenues

The 2021-2022 adopted budget anticipated revenue sources in the amount of $29,603,700. Through January 31, 2022, actual revenue collections totaled $11,666,072 or about 39% of the budgeted amount. District staff has analyzed the revenue activity for the first seven months of the FY, as well as activities scheduled for the remainder of the FY, and recommends various adjustments to the revenue portion of the budget as shown in Exhibit 21-A and discussed below:

• Increase of $100,000 in property tax based on actual collections through the first half of the FY.
• Increase of $300,000 in user fee based on actual collections through the first half of the FY. Original budget had assumed slight increase in revenue; however, actual collections for the first seven months was higher than the anticipated budget.
• Decrease of $1,239,000 in grants based on actual collections through the first half of the FY. Both the project expenditures related to the grant and the revenue have been deferred to next fiscal year based on the timing of the project.
• Increase of $500,000 in Debt Reserve Fund as this was used to pay additional principal payment towards Mechanics Bank loan.
• Decrease of $1,966,900 in Fund Balance use of reserves. Since revenues have increased and a reduction in project expenditures, originally proposed use of reserves is reduced.

The cumulative effect of these revenue adjustments is a decrease of $2,305,900 in projected revenues for FY 2021-2022.

Expenditures

The original budget envisioned expenditures of $29,603,700 in the fiscal year ending June 30, 2022. Through January 31, 2022, actual expenditures totaled $9,842,041, or approximately 33% of the budgeted amount. The spending pattern at mid-way point of the fiscal year is not unusual because most of the project expenditures for the first half of each fiscal year are low. District staff has analyzed the expenditure activity for the first seven months of the fiscal year, as well as activities scheduled for the remainder of the fiscal year, and recommends various adjustments to the expenditure portion of the budget as discussed below:

• The personnel services portion of the budget had no adjustments as shown on Exhibit 21-B.

• The supplies and services portion of the budget decreased by $28,100 as shown on Exhibit 21-C.

• The fixed assets portion of the budget increased by $150,000 as shown on Exhibit 21-D.

• As presented on Exhibit 21-E, project expenditures decreased by a net amount of $2,927,800. Some of the larger adjustments are as follows:
1. Reduction of $350,000 for PWM Expansion project as the work will not be completed in this fiscal year.
2. Increase of $140,000 for Measure J effort as additional legal work will need to be performed during the current fiscal year.
3. Reduction of $1,000,000 for ASR Dechlorination project as this is no longer required due to change in permit conditions.
4. Reduction of $300,000 for ASR site improvement works as this is deferred to next fiscal year.
5. Reduction of $1,239,000 for IRWN implementation project as this is deferred to next fiscal year.
6. Reduction of $100,000 for Graywater/Rainwater project as this is deferred to next fiscal year.
7. Other adjustments to the project expenditures as noted in the exhibit.

The cumulative effect of the adjustments to the expenditure side of the budget is a net decrease of $2,305,900. Use of reserve (carry forward of project funds from prior year) in the amount of $2,207,100 is needed to balance the mid-year budget. Original budget had anticipated use of reserve in the amount of $4,174,000.

Reserves

The District’s reserve balance is projected to be as follows:

Monterey Peninsula Water Management District
Analysis of Reserves
2021-2022
	Projected	Actual	FY 2021-2022
	Balance	Balance	Budget	Est. Balance
Reserves	6/30/2021	6/30/2021	Changes	06/30/2022
Litigation/Insurance Reserve	250,000	250,000	0	$250,000
Capital Equipment Reserve	839,000	839,000	244,300	$1,083,300
Flood/Drought Reserve	328,944	328,944	0	$328,944
Debt Reserve	222,524	222,654	0	$222,654
Pension Reserve	300,000	300,000	100,000	$400,000
OPEB Reserve	300,000	300,000	100,000	$400,000
Debt Service Reserve (Mechanics Bank)	500,000	500,000	0	$500,000
General Operating Reserve	9,224,141	16,870,195	(1,707,100)	$15,163,095
Totals	$11,964,609	$19,610,793	($1,262,800)	$18,347,993

The above adjustments will result in an estimated reserve balance of $18,347,993 at June 30, 2022 as shown on Exhibit 21-F. This amount meets the minimum 5% of the operating budget established by the Board during the 2005-06 budget process. The original adopted budget had a projected reserve balance of $14,862,209 for the fiscal year.

EXHIBITS

21-A Revenues

21-B Personnel Costs

21-C Supplies & Services Costs

21-D Capital Assets

21-E Project Expenditures

21-F Reserves Analysis

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